S P Setia’s Sydney Project: A Promising Opportunity in a Recovering Property Market

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S P Setia’s latest venture in Sydney is expected to boost its FY25 sales and strengthen its presence in Australia’s vibrant property market. Learn more about this strategic move and its impact on the company’s future growth

PETALING JAYA, 05 Sep 2023 – In light of the promising recovery in the property market, S P Setia Bhd’s recent venture in Sydney presents a favorable opportunity for the company.

This development is anticipated to contribute significantly to S P Setia’s sales in financial year 2025 (FY25), with the earnings impact expected to materialize in FY27, as revenue recognition is contingent upon project completion in accordance with Australian Accounting Standards.

TA Research has chosen to keep its earnings forecasts unchanged for the property developer for the period spanning FY23 to FY25, pending the finalization of the acquisition.

Furthermore, the research firm has maintained its target price of RM1.05 per share and reaffirmed its “buy” recommendation for S P Setia’s stock.

S P Setia recently announced its acquisition of a freehold land parcel spanning 1,374 square meters (approximately 14,790 square feet) for a cash consideration of A$73.3 million (RM220 million).

The proposed acquisition is expected to conclude within 12 months from the date of the contract of sale.

This latest foray into Australia marks S P Setia’s sixth project in the country and represents its debut in the bustling city of Sydney.

TA Research views this as a well-timed expansion that will further solidify S P Setia’s footprint in Australia. The company’s ongoing projects, Sapphire by the Gardens and Uno Melbourne, have already garnered remarkable take-up rates of over 94%, with expected completions in 2023 and 2024, respectively.

The newly acquired land is situated at 20 Atchison Street in St Leonards, a prime location in Sydney’s North Shore. It is strategically positioned just six kilometers away from the Sydney central business district and is in proximity to St Leonards Train Station, the upcoming Crows Nest Metro Station slated for completion by the end of 2024, St Leonards Medical Centre, educational institutions, and the renowned Chatswood Chase Shopping Centre.

The land is earmarked for a residential development, complemented by secondary commercial and retail components, with an estimated gross development value (GDV) of A$236 million (RM708 million).

S P Setia aims to unveil this project within the next 12 to 15 months, aligning with the expected market recovery.

However, the land cost for this new project accounts for 31% of the GDV, which may appear relatively higher compared to S P Setia’s previous land acquisitions in Melbourne between 2010 and 2016, typically ranging between 10% and 26%.

This discrepancy is attributed to the significant disparity in land prices between Sydney and Melbourne, as noted by TA Research. As of July 2023, Sydney’s median house values exceed Melbourne’s by a substantial 52%, underscoring the differing market dynamics between the two cities, according to TA Research’s report on S P Setia.

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